The Latest on the Farm Bill Agricultural and Food Policy Center Texas A&M University Dr. Edward G. Smith Extension Economist Marketing and Policy Southern Regional Outlook Conference Atlanta, Georgia September 24, 2001

Presentation Outline  Current Situation  Issue in the Debate  Timetable

Current Situation  Chronic Liquidity Problem  Pro forma cash flow severe for crop producers  Not as bad for livestock and dairy  Solvency issues not as bad due to ad hoc emergency spending and lower debt service

US House Ag Committee Strategy  Bipartisan: Combest/Stenholm  Ask the stakeholders  Encourage buy in by special interest  Develop a bill based on what was said

What the US House Ag Committee Heard  Maintain flexibility  Maintain export competitiveness  Maintain WTO commitment  Incorporate a better safety net that reduces the need for ad hoc assistance

What does H.R Do?  Maintains flexibility  Same rules  Maintain export competitiveness  Marketing loans retained  Maintains fixed payments  Allows base update  Adds counter-cyclical target price program for income support  Extends thru 2011

How Much Money? Budget Resolution  $5.5B 2001  $7.35B 2002  $66.1B if  Surplus greater than SS/MC surplus  SS lockbox opened due to war

Who Gets the Money?  (AP) Lubbock Avalanche Journal “Congress has touted the checks as a way to help small –and medium- size farms cover losses associated with natural disasters and prop up the price of certain low paying crops” But “AP’s analysis…showed that 63% of the money went to the top 10% of recipients”

Who Gets the Money?  Per unit of production  Per farmer  Can new players join the game?  Can old players return?

Could the Money be Spent Better?  August 22,2001 Des Moines Register “a rare chance to stop financing environmental harms and start financing environmental benefits” “fundamentally flawed because the cropping of fragile and marginal lands is reinforced by grain subsidies that stimulate production and reduce NCFI”

More Issues  Flexibility vs Inventory management  Remain Export Competitive  TPA/WTO  Value of the dollar  Marketing loan  What color are the payments?

Timetable  This year or next?  Congress adjourn in Oct/Nov  Terrorist Response  Budget impact  Senate using corn/soybeans as basis that ag is not together  February 2002 critical  1996 FAIR Act expires December 2002